Income Tax Amendment Regulations 2003 (No. 1)

Administered by Department of the Treasury

Legislation au F2003B00214 Regulations Not in force Legislative Instrument

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Income Tax Amendment Regulations 2003 (No. 1) 2003 No. 204

EXPLANATORY STATEMENT

STATUTORY RULES 2003 No. 204

Issued by authority of the Minister for Revenue and Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Amendment Regulations 2003 (No. 1)

Section 266 of the Income Tax Assessment Act 1936 (the Act) provides that the Governor-General may make regulations not inconsistent with the Act or the Income Tax Assessment Act 1997, prescribing all matters which by the Act or the Income Tax Assessment Act 1997 are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to the Act or the Income Tax Assessment Act 1997.

Section 23AD of the Act provides an exemption from income tax of pay and allowances of Australian Defence Force (ADF) members performing certain overseas duty.

Subsection 23AD(2) of the Act provides that the Income Tax Regulations 1936 (the Principal Regulations) may declare that duty with a specified organisation in a specified area outside Australia after a specified day is eligible duty for the purposes of section 23AD.

Subsection 23AD(1) of the Act exempts the pay and allowances earned by ADF members where there is a certificate in force, issued in writing by the Chief of the Defence Force, that the members are on eligible duty as declared in the Principal Regulations. The certificate comes into force at the later of either the time specified in the certificate or the time the person arrives for duty in the specified area. The certificate continues to be in force until the earliest of the time of departure from the specified area, the date of revocation of the certificate or a time prescribed by regulation (subsection 23AD(3)) and is in force during any period of hospital treatment during the person's eligible duty.

Regulation 7A of the Principal Regulations specifies duty with various organisations in various areas outside Australia and declares that to be eligible duty for the purposes of section 23AD of the Act.

The amending regulations declare that:

•       duty with the United Nations Mission of Support in East Timor (UNMISET) in the specified area of operations (generally in East Timor) is eligible duty on or after 20 May 2002; and

•       duty with Operation Falconer in the specified area of operations (generally in the Persian Gulf) is eligible duty on or after 18 March 2003.

The ADF members serving in East Timor were previously deployed in support of the United Nations Transitional Administration in East Timor (UNTAET) and the International Force for East Timor (INTERFET). Exemptions for eligible duty with UNTAET and INTERFET were declared for ADF members so deployed. The amending regulations that declare duty with UNMISET as eligible duty is necessary as a consequence of East Timor becoming independent on 20 May 2002 and as a consequence of the change in name of the UN mission in East Timor.

The ADF members serving in the Persian Gulf were deployed in March 2003 on Operation Falconer in support of the coalition forces. The amending regulations that declare duty with Operation Falconer as eligible duty is necessary because the Minister for Defence declared that service with Operation Falconer in the specified area of operations (generally in the Persian Gulf) to be `warlike' service for the purposes of section 23AD of the Act.

Eligible duty for ADF members deployed with UNMISET commences on or after 20 May 2002. Similarly, eligible duty for ADF members deployed with Operation Falconer commences on or after 18 March 2003. Subsection 48(2) of the Acts Interpretation Act 1901 (AIA) provides that a regulation, or a provision of regulations, has no effect if it would take effect before the date of notification, unless the rights or liabilities of a person (other than the Commonwealth) would not be disadvantaged. Exemption from income tax for ADF members on eligible duty is clearly to their advantage. Therefore the amending regulations are not subject to subsection 48(2) of the AIA and are validly made.

Details of regulations are as follows.

Regulation 1: Names regulations.

Regulation 2: Provides that regulations commence on gazettal.

Regulation 3: Provides that the Income Tax Regulations are amended as set out in these regulations, by inserting Regulation 7A(f) to prescribe the following duty to be eligible duty:

(f)       duty with the UNMISET in either or both of:

(i)       East Timor; and

(ii)       the territorial sea of East Timor;

on or after 20 May 2003;

(g)       duty with Operation Falconer, on or after 18 March 2003 within the area bounded by the following geographical coordinates:

•       38 00'N 68 00'E

•       38 00'N 32 00'E

•       10 00'N 32 00'E

•       10 00'N 68 00'E

The regulations commenced on gazettal.

 

Overview

The Income Tax Amendment Regulations 2003 (No. 1) were enacted in 2003 to address the need for updating the eligibility criteria for tax exemptions on income earned by Australian Defence Force (ADF) members performing overseas duty. These regulations were developed under the authority of the Income Tax Assessment Act 1936, which allows for the creation of regulations necessary to implement the provisions of the Act and the Income Tax Assessment Act 1997. The objective of these amending regulations is to ensure that ADF members serving in specific overseas missions receive the tax benefits intended by the Act. Specifically, they aim to recognise the change in the status of the United Nations Mission of Support in East Timor (UNMISET) following East Timor's independence, and to acknowledge the ADF's involvement in Operation Falconer in the Persian Gulf, which was declared as "warlike" service. By updating the regulations, the government seeks to maintain the integrity of the tax exemption framework for ADF members while reflecting the evolving nature of their overseas deployments.

Scope and Application

The Income Tax Amendment Regulations 2003 (No. 1) extend the application of the Income Tax Assessment Act 1936 by amending the Income Tax Regulations 1936 to declare specific overseas duties of Australian Defence Force (ADF) members as eligible for tax exemptions. The regulation specifically addresses ADF members serving with the United Nations Mission of Support in East Timor (UNMISET) in East Timor and its territorial sea, effective from 20 May 2003, and ADF members engaged in Operation Falconer in the Persian Gulf, effective from 18 March 2003. The scope of the regulations is limited to ADF members on duty in the specified areas and timeframes, and they do not apply to other entities, industries, or individuals. The regulations have a national jurisdictional reach within Australia and apply to all ADF members fulfilling the criteria set forth. The amending regulations are validly made as they do not disadvantage any person and serve to exempt ADF members from income tax on their pay and allowances during the specified overseas duties.

Key Provisions

The Income Tax Amendment Regulations 2003 (No. 1) primarily serve to extend the exemption from income tax for certain overseas duties undertaken by Australian Defence Force (ADF) members. Section 23AD of the Income Tax Assessment Act 1936 provides this exemption, contingent upon the ADF members being on duty that is declared eligible by regulation. Regulation 7A of the Income Tax Regulations 1936 lists the areas and organisations for which such duty is eligible. The amending regulations add two new entries to this list, specifically for duty with the United Nations Mission of Support in East Timor (UNMISET) and with Operation Falconer in the Persian Gulf. Under these regulations, ADF members who are on duty with UNMISET in East Timor or the territorial sea of East Timor on or after 20 May 2002, and those on duty with Operation Falconer in the Persian Gulf on or after 18 March 2003, are considered to be on eligible duty. To qualify, a certificate must be issued by the Chief of the Defence Force, confirming that the duty is eligible. This certificate remains in force until the earliest of the member's departure from the specified area, the revocation of the certificate, or a time prescribed by regulation. The exemption applies during any period of hospital treatment as well. The regulations impose specific obligations on ADF members to ensure they obtain and maintain the necessary certification from the Chief of the Defence Force to avail of the tax exemption. Additionally, they require the Chief of the Defence Force to issue certificates accurately and timely to ADF members who are on eligible duty. Failure to comply with these obligations may result in the loss of the tax exemption for the affected period. There are no explicit offences, penalties, or civil or criminal consequences outlined in the amending regulations themselves. However, failure to adhere to the requirements for obtaining and maintaining the necessary certification could indirectly result in the ADF member being liable for income tax on their pay and allowances for the periods in question. This liability could potentially lead to financial penalties or legal actions if not rectified. The primary focus of the regulations is to clarify and extend the scope of the tax exemption rather than to impose new sanctions.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.